In a ruling that could lead to a U.S. Supreme Court decision on the issue, the Court of Appeals for the Federal Circuit recently found that the prohibition against registering disparaging marks violates the First Amendment and is therefore unconstitutional. In re Tam, 808 F.3d 1321 (Fed. Cir. 2015). After an en banc hearing, the court vacated the ruling of the Trademark Trial and Appeal Board that the mark THE SLANTS disparages people of Asian descent and is therefore unregisterable for use with “entertainment in the nature of live performances by a musical band” named “The Slants.”

Section 2(a) of the Trademark Act prohibits the registration of marks that are considered disparaging. 15 U.S.C. § 1052(a). A disparaging mark is one that “dishonors by comparison with what is inferior, slights, deprecates, degrades, or affects or injures by unjust comparison.” In re Geller, 751 F.3d 1355, 1358 (Fed. Cir. 2014) (dealing with STOP THE ISLAMISATION OF AMERICA) (alterations omitted), cert. denied, __ U.S. __, 135 S. Ct. 944 (2015). To determine whether a mark is disparaging, examining attorneys at the U.S. Patent and Trademark Office (USPTO) consider (1) the likely meaning of the mark in question as used with the relevant goods or services and (2) whether that meaning may be disparaging to a substantial composite of identifiable persons, institutions, beliefs or national symbols. Trademark Manual of Exam. Proc. § 1203.03(b)(i) (Jan. 2015 ed.) (citing Geller at 1358).

The prohibition against the registration of disparaging marks has been invoked with respect to, among others, MORMON WHISKEY, DON’T BE A WET BACK, and, perhaps most notably, REDSKINS (a ruling now on appeal in the Fourth Circuit). Here, both sides conceded that THE SLANTS reflects a racial stereotype. The court noted the mark is derived from an ethnic slur for Asians and that Simon Shiao Tam, the Asian American “front man” for the rock group, had chosen the band’s name for that reason. The court quoted Mr. Tam as saying, “We want to take on these stereotypes that people have about us, like the slanted eyes, and own them.”

The court said that the disparagement prohibition discriminates on the basis of message and regulates the expressive aspects of marks, not merely their function as commercial speech. Thus, the court held, the prohibition is subject to the strict scrutiny review applicable to viewpoint discrimination even though it bans no speech and regardless of the government-speech or government-subsidy doctrines. The court’s analysis focused on the importance of the benefits of federal trademark registration and the uncertainty of state or common-law protection for marks that are not registerable with the USPTO.

The court drew a distinction between a trademark registration and state-produced specialty license plates, which the Supreme Court has held are government speech. Walker v. Texas Div., Sons of Confederate Veterans, Inc., __ U.S. __, 135 S. Ct. 2239 (2015). The court also drew a distinction between government subsidies for things such as medical care or tax exemptions and the government’s issuance of a trademark registration, which, the court said, is part of a “regulatory regime, not a government subsidy program.”

In addition, the court held that Section 2(a) is unconstitutional even under the intermediate-scrutiny standard applicable to commercial speech. The court said that because the disparagement provision of Section 2(a) does not address misleading, deceptive, or unlawful marks, only a “substantial government interest” could justify the provision. “All of the government’s proffered interests boil down to permitting the government to burden speech it finds offensive,” the court said, and because “[t]his is not a legitimate interest,” Section 2(a) cannot satisfy the intermediate-scrutiny test laid out in the commercial-speech case of Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980). Thus, although it acknowledged that its decision could lead to “the wider registration of marks that offend vulnerable communities” (including, in this case, the Asian American community), the court held that Section 2(a) is unconstitutional.

The one partially dissenting and two dissenting opinions said that trademarks are commercial speech and, as such, are not entitled to the higher degree of protection provided to political speech. One dissent said that a term such as THE SLANTS is political speech as well as a trademark and therefore should not be denied registration because it is disparaging. Another dissent pointed to the long history—almost 70 years—of Section 2(a) and asked rhetorically, “Is there no such thing as settled law, normally referred to as stare decisis?”

The executive branch of the federal government has until late March to decide whether to ask the Supreme Court to review the decision. Even if the government does not seek an appeal, however, the Court of Appeals for the Fourth Circuit could reach a different conclusion about Section 2(a) in the REDSKINS litigation, thereby leading to a circuit split and a possible appeal to the Supreme Court. In either event, and perhaps especially in view of the effect the late Justice Antonin Scalia’s absence may have on the court’s vote, trademark owners and practitioners as well as the USPTO will be on high alert as to which way the highest court may “slant.”

Counterfeiting of electronic parts in the defense industrial supply chain has been on the increase. In 2011 alone, the U.S. government identified 1,800 cases of counterfeiting involving nearly 1,000,000 electronic parts. Such parts include integrated circuits, discrete electronic components (capacitors, resistors, transistors, etc.), circuit assemblies, and embedded software or firmware. Because counterfeit parts often degrade or fail, leading to loss of mission capabilities and even loss of life, the integrity of the electronic parts supply chain is a serious concern.

In an effort to stem the introduction of counterfeits into the supply chain, the National Defense Authorization Act of 2012 required the U.S. Department of Defense (DoD) to implement a program to enhance both the DoD’s and its contractors’ detection and avoidance of counterfeit parts. In turn, the DoD has issued regulations requiring contractors, subcontractors, and vendors to establish and maintain systems for detecting and avoiding counterfeit electronic parts.

The failure of a company at any level in the supply chain to implement such a system can mean loss of contract opportunities. Many suppliers and subcontractors mistakenly believe that the regulations do not apply to them because they are not subject to the federal government’s cost-accounting standards or because they provide commercial items and may not be prepared to perform on contracts subject to the regulation. Large DoD contractors may be reluctant to subcontract through their traditional supply chain if they cannot be sure of a subcontractor’s compliance.

Any company supplying electronic parts to the DoD or to a government contractor should determine if it must establish a system for detecting and avoiding counterfeit electronic parts. Contractors that have a DoD contract to supply electronic parts (or products or services that include electronic parts) and that are subject to the government’s cost-accounting standards and all of their subcontractors, at any level, that supply electronic parts or products or services including electronic parts, are subject to the regulation. Importantly, the flow-down of this requirement applies even to those subcontractors that are not subject to the cost-accounting standards -- even if the subcontract is for commercial items or commercial off-the-shelf items.

The regulations outline the necessary elements of a counterfeit electronic parts detection and avoidance system but allow individual businesses to determine how best to meet each element. At a minimum the system must include:

Training;

A process to abolish counterfeit parts proliferation;

A process for maintaining traceability;

The use of suppliers that (a) are original manufacturers or have the express written authority of original manufacturers or of authorized aftermarket suppliers or (b) meet applicable counterfeit detection and avoidance system criteria;

The reporting and quarantining of counterfeit parts;

Methods to identify suspect parts and determine if they are counterfeit;

The design, operation, maintenance of systems to detect and avoid counterfeit parts and suspect counterfeit parts;

Flow-down requirements, including system criteria, to all subcontractors at all levels providing electronic parts or performing authentication testing;

A process of keeping continually informed about current information and trends;

A process for screening Government-Industry Data Exchange Program reports (seewww.gidep.org) and other sources; and

Control of obsolete electronic parts.

In creating these regulations the DoD recognized that small entities subcontracting under covered contracts may be affected. The DoD found, however, that prime contractors cannot bear all responsibility for preventing the introduction of counterfeit parts, which can enter the supply chain at any level, and therefore that checks at multiple levels are necessary. Eliminating counterfeit parts from the defense supply chain—and thereby eliminating the unwarranted risk such parts create—is a goal well worth the effort.

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